The Arabist

The Iranian rial and the price of Saudi chicken

The devaluation of Iran's currency, the rial, by as much as 40 percent in the last few days has made it very difficult for the average Iranian to afford everyday food stuffs. It is no surprise that protests have broken out in Tehran's central bazaar and its surrounding streets. The bazaar is a critical pillar of support for the Iranian regime. The loss of confidence among Iran's merchant and business classes could shake the foundations of the Islamic Republic.

Saudi Arabians are forgoing one of their favourite foods as a Twitter campaign against high poultry prices spreads.

The “Let it Rot” campaign urges Saudis to refrain from eating chicken to punish traders who they say have raised prices by about 40 per cent in the past two weeks.

Saudi Arabia is a leading supplier of chicken, a staple in the country, to neighbouring countries and an export ban imposed this week in an effort to defuse the anger is likely to trigger regional shortages.

One would think not if Saudi chicken are domestically produced. Still, there's much schadenfreude about the troubles of the Iranian economy (which appear not to target regime officials, as "smart sanction" advocates argued, but ordinary people in the hope that this will put pressure on the government — something that led to a disaster in Iraq) and much less about Saudi Arabia's.

Here's an argument that the rial's devaluation is not as serious as might appear, because the government itself is the main foreign currency earner. The conclusion:

Does all this mean that Iran’s economy is on the verge of collapse, as Israel’s Finance Minster reportedly said? The answer is no, because most of the economy is shielded from this exchange rate, though not from the ill effects of the sanctions, which will continue to bite for a while. Would it cause sufficient economic pain that would push the Iranian government to make concessions in its nuclear standoff with the West? The answer is not likely. The multiple exchange rate system, as inefficient as it is, will protect the people below the median income, to whom the Ahmadinejad government is most responsive.

Update: Paul Mutter has a round-up of the issue of the Iranian rial at PBS' TehranBureau.